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Bond

A new Bond contract is created for each borrower. They implement the standard EIP-20/ERC20 token methods as well as Arbor specific methods. Each BondToken represents a zero coupon bond that can be purchased by lenders.

Bonds support the following functionality:

Borrower

  • Depositing collateral and minting bond shares
  • Handling payment for the issuer via pay()
  • withdrawing collateral withdrawExcessCollateral()
  • withdrawing excess paymentTokens withdrawExcessPayment()

Lenders

  • Handling convertibility via a configured ratio and the ability for lenders to convert their bond shares using convert()
  • Allowing bond share redemption for the bond holders via redeem()

Collateral

Borrowers specify the ERC20 tokens they would like to use as collateral when creating the bond. Only a single collateral type is supported.

Convert

If convertibility is enabled for the Bond, Bondholders will have an option to redeem their bond shares for the underlying collateral at a predefined "convertibility ratio".

For example: when the Bond is created, the ratio may be 1 bond share : .5 collateral tokens. This gives the lenders equity upside because the bond share can be redeemed, at any time before maturity of the bond, for a portion of a collateral token. Convertibility cannot be changed once set and after the Bond's maturity, the bond shares can no longer be redeemed for the collateral token.

Pay

This gives the ability for a borrower to pay their debt. Paying allows the borrower to withdraw any collateral that is not used to back convertible tokens. After the maturity date is met, all collateral can be withdrawn and the Bond will be considered to be PAID. At this time, lenders lose the ability to convert their bond shares into the collateral token. Lenders gain the ability to redeem their bond shares for the borrowing token.

Redeem

if paid

Bond shares can be redeemed for a pro rata amount of the payment in the Bond contract.

if defaulted

Bond shares can be redeemed for a pro rata amount of the collateral + payment in the Bond contract.

Design Decisions

Use clone factory instead of normal factory for creating new Bonds

Upgradability strategy

Contracts are not upgradable. In the future it will be possible for borrowers to refinance their loan by transferring Bond ownership to a "Refi Vault".